Keeping an eye on Communist, Totalitarian China, and its influence both globally, and we as Canadians. I have come to the opinion that we are rarely privy to truth regarding the real goal, the agenda of Red China, and it's implications for Canada [and North America as a whole]. No more can we rely on our media as more and more information on China is actively being swept under the carpet - not for consumption.

Saturday, April 9, 2016

China’s robot army set to surge

China’s robot army set to surge

China’s uptake of industrial robots is set to rise rapidly in the coming years as higher labour costs and the heightened aspirations of workers push manufacturers to embrace automation.

The development may add to fears that workers in poorer countries are most in danger of being displaced by automation, with analysis by Citi and the Oxford Martin School, a research and policy unit of the UK university, published earlier this year suggesting that more than 75 per cent of jobs in China are at a “high risk” of computerisation.

Mirae Asset Management, an Asia-focused house with $75bn of assets, predicts that China’s robot army will expand at a compound annual growth rate of 35 per cent until 2020.

Given that the International Federation of Robotics estimates that China had 260,000 industrial robots last year, Rahul Chadha, chief investment officer of Mirae, says: “Using the rule thumb that one industrial robot replaces four to five workers, this suggests that robots have rendered more than 1m people jobless.”

This figure is set to rise sharply in the coming years. As the first chart shows, the number of robots per 1,000 employees in China, as of 2013, was just 30 per cent of the level in North America, 11 per cent of the German figure, 9 per cent of Japan’s tally and 7 per cent of that in South Korea.

Mirae argues that China’s use of robots is tracing the path blazed by Japan a quarter of a century ago, and still has several years of rapid expansion ahead of it, as the second chart shows.

This concurs with forecasts from the IFR, which says China acquired 57,000 robots in 2014 but is likely to be buying 150,000 a year by 2018.

Mr Chadha, who calculates that robots will replace around 3.5m Chinese workers over the next five years, says: “The message that comes from the leadership is on improving productivity via automation. They are paranoid about doing things quickly, they believe they have got to because their competitors will do the same.

“When I meet companies on the ground, they say ‘the demand environment is not great, what we can do is improve our processes, improve our productivity’.”

Mr Chadha believes the process is being driven by the changing dynamics in the labour market. Until recently, China’s low wage levels minimised the benefit of replacing labour with capital.

This is starting to change, however. While hourly wages in Chinese are still relatively low in absolute terms, they rose at a compound annual growth rate of 17 per cent in the decade to 2012, far outstripping pay growth in other major economies, as the last chart shows.

Although the pace of wage growth will inevitably slow, the availability of labour is also likely to tighten. Whereas the size of China’s labour force rose by 80m people to 930m in the decade to 2010, Mirae believes it is likely to flatline for the next few years, before slowly declining.

Moreover, Mr Chadha says the younger workers who are still entering the labour force are increasingly shunning the manufacturing sector, with a better educated population preferring service sector employment to often tedious, repetitive and potentially unsafe industrial jobs.

Because of this, and the flat labour force, he does not believe the likely rise in robot-driven redundancies will cause social problems or unrest in China, or in neighbouring countries with similarly low birth rates such as Japan and South Korea.

However, he says the automation trend “has huge social ramifications for somewhere like India, the Middle East or Africa, where you have good demographics. India needs to create 10m jobs a year.

“This is an added challenge for these economies. They have to do something different to attract investors, or we will see more tariff barriers,” Mr Chadha fears, as poorer countries attempt to maintain employment levels by barring imports from countries with higher, robot-driven, productivity.

At present, foreign companies still dominate the market for robots in China, with the likes of Japanese duo Fanuc and Yaskawa Electric, Swiss-Swedish group ABB and Kuka of Germany accounting for two-thirds of sales, although this is down from three quarters in 2009.

However, Mirae notes that domestic producers now have almost half the market share in more basic segments such as handling and dispensing, even as they are smaller players in higher tech areas such as assembly and welding.

Profitability for China’s leading producers, which include HollySys Automation and Shenyang Siasun Robot & Automation, “is still depressed because of their aggressive pricing strategy and lack of expertise in core components manufacturing”, Mirae says, although it expects the pricing differential to narrow as Chinese companies focus less on gaining market share.

About Me

I can be found exploring dried up river beds. I carve stone found on those hikes. Yes, I collect rocks!The hiking here is perhaps the best I've come across. Like cooking, photography and visits to artistic and local events. We love to travel; places we have been to include London [UK], Mallorca, Acapulco, Playa Del Carmen, Athens, Mykonos, Santorini, Maui, LA, San Diego, Puerto Escondido, Edinburgh, Isle of Man, Isle Of Skye, Kirkwall/The Orkneys and Honolulu.